News from Notch Consulting, Inc.

October 28, 2008

Michelin Expects Run-Flats to Remain a Niche Product

Filed under: General, Run-flats — Notch @ 3:22 pm

The always erudite David Shaw recently had a short article in the European Rubber Journal (subscription required) that resonated with me. David reports on an interview with Michelin’s research director Philippe Denimal wherein he indicates that Michelin’s research suggests that only three percent of drivers would want to use a run-flat system. This means that these products will remain a niche product going forward. The issues preventing greater penetration are well-known: existing self-supporting run-flats are heavy and tend to have worse fuel consumption than conventional tires.

Nonetheless, Mr. Denimal indicated that there is still a strong demand for extended mobility tires in the marketplace, but that the solution will not be in form of either a spare tire or self-supporting run-flats. Indeed, Michelin believes that within ten years most cars would be sold with only four tires rather than five including a spare. Furthermore, the front tires would be a different size from the rear tires, which is already common in sports cars.

Mr. Denimal said that Michelin is working on solutions, as are its competitors. Conti, for instance, offers Contiseal self-sealing tires, which incorporate a sealant paste to seal punctures. Also, Pirelli and Conti are working on chip-in-tire technologies. For his part, Mr. Denimal offered the opinion that the sealant approach negatively affects fuel consumption, while current generations of chip-in-tire technologies are too expensive for the general market (though useful in specialty tires, such as mining equipment).

These conclusions back up Notch’s own findings in Prospects for Run-Flat Tires, a market research report published last year. In that report, Notch forecast that RFT would see double-digit gains but still constitute only about 2% of passenger tire demand by 2015, with usage heavily weighted toward the OE sector and HP/UHP tires. Attempts to introduce RFT on mainstream vehicles, such as minivans, have not been successful. In addition to the added weight and fuel consumption issues, RFT are too expensive and have too-short service lives to appeal to soccer moms. Also, the cell phone has done much to alleviate fears of being stranded by a flat tire.

However, that does not mean that RFT can not be an attractive niche for tiremakers, as these are premium tires sold to highly educated, high income consumers. In many ways, RFT mirror the larger trends in the passenger tire market, which is becoming increasingly compartmentalized between a large, cost-above-all-else segment for most average consumers, and a series of small but highly profitable (and overlapping) niche segments, including HP/UHP tires, winter tires, run-flats, off-road tires, etc. The question going forward is, how badly will the current era of high fuel prices and economic uncertainty hit these niche segments?

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